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FM Assignment Questions For Submission On 27th April 2020

The document provides instructions for an assignment submission due on April 27th, 2020. It includes 3 questions relating to financial statements and capital budgeting. Question 1 asks to prepare a working capital statement for a production level of 104,000 units, given cost and profit details from a proforma cost sheet. Question 2 evaluates whether a textile manufacturer should purchase new equipment costing Rs. 1 lakh to produce high quality fabric, considering sales, costs, tax rate, and cost of capital. Question 3 analyzes whether an automobile company should replace an old blender with a new automatic machine, identifying relevant cash flows and computing net present value and profitability index to determine if it is an attractive project

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60 views2 pages

FM Assignment Questions For Submission On 27th April 2020

The document provides instructions for an assignment submission due on April 27th, 2020. It includes 3 questions relating to financial statements and capital budgeting. Question 1 asks to prepare a working capital statement for a production level of 104,000 units, given cost and profit details from a proforma cost sheet. Question 2 evaluates whether a textile manufacturer should purchase new equipment costing Rs. 1 lakh to produce high quality fabric, considering sales, costs, tax rate, and cost of capital. Question 3 analyzes whether an automobile company should replace an old blender with a new automatic machine, identifying relevant cash flows and computing net present value and profitability index to determine if it is an attractive project

Uploaded by

ಯೋಗೇಶ್ ಪಿ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Assignment Questions for Submission on 27th April 2020

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Instructions :

1. All questions are compulsory.


2. Each question carries 3 mks. 1 mks is for presentation.(3*3=9+1 = 10 mks)
3. Submission should be only through uploading your assignment on Google classroom
exactly on or before the due date. Late submissions will not be accepted.
4. Assignment should be hand written in step by step manner & scanned and uploaded onto
google classroom.
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1. A proforma cost sheet of a company provides the following particulars:(10)

Particulars Amount per unit


Elements of cost:
Raw materials Rs. 80
Direct labour 30
Overhead 60
Total cost 170
Profit 30
Selling price 200

The following further particulars are available:


Raw materials in stock, on average, one month; Materials in process (completion stage,
50 per cent), on average, half a month; Finished goods in stock, on average, one month.
Credit allowed by suppliers is one month; Credit allowed to debtors is two months;
Average time-lag in payment of wages is 1.5 weeks and one month in overhead expenses;
one-fourth of the output is sold against cash; cash in hand and at bank is desired to be
maintained at Rs.3,65,000.
You are required to prepare a statement showing the working capital needed to finance a
level of activity of 1,04,000 units of production. You may assume that production is
carried on evenly throughout the year, and wages and overheads accrue similarly. For
calculation purposes, 4 weeks may be taken as equivalent to a month. Provide for 10%
margin for contingencies.

2. A textile manufacturer has under consideration the proposal of production of high quality
fabric. The necessary equipment could cost Rs.1 Lakh and would last for 5 years. The tax
rate is 35%, the depreciation is 20% on WDV. The expected salvage value is Rs.10,000.
The fabrics can be sold at Rs.4 each. The manufacturer will incur cash cost of Rs.25,000
each year. The overhead costs for new line would be Rs.5,000. The variable costs are
estimated at Rs.2 per fabric. The manufacturer estimates it will sell about 75,000 fabrics
per year. Should the proposed equipment be purchased?. Assume 20% cost of capital and
additional working capital requirement of Rs.50,000 at the beginning.

3. Maruti Udyog is considering a new automatic machine blender. The new blender will last
for 10 years and would be depreciated to zero over the 10 years period. The old blender
would also last for 10 more years and would be depreciated to zero over the same 10 years
of period. The old blender has a book value of INR.20,000 but could be sold for
INR.30,000(the original cost was INR.40,000). The new blender would cost INR.1,00,000. It
would reduce labour expense by INR.12,000 p.a. The company is subject to 50% tax rate.
Their cost of capital is 8% p.a. You are required to :
a. Identify all the relevant cash flows for this replacement decisions.
b. Compute the Net Present Value & Profitability Index.
c. Determine whether this is an attractive project.

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